Test your basic knowledge |

AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






2. Ei = (%dQd good X)/(%d Income)






3. Occurs when LRAC is constant over a variety of plant sizes






4. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






5. The output where ATC is minimized and economic profit is zero






6. The change in quantity demanded resulting from a change in the price of one good relative to other goods






7. Exists if a producer can produce a good at lower opportunity cost than all other producers






8. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






9. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






10. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






11. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






12. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






13. Ed = 1






14. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






15. Ed < 1






16. Models where firms agree to mutually improve their situation






17. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






18. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






19. When firms focus their resources on production of goods for which they have comparative advantage






20. Ed > 1 - meaning consumers are price sensitive






21. AVC = TVC/Q






22. Total product divided by labor employed. APL = TPL/L






23. The lost net benefit to society caused by a movement away from the competitive market equilibrium






24. Ed = 0 - no response to price change






25. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






26. AFC = TFC/Q






27. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






28. MUx / Px = MUy/Py or MUx/MUy = Px/Py






29. Models where firms are competitive rivals seeking to gain at the expense of their rivals






30. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






31. The additional benefit received from the consumption of the next unit of a good or service






32. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






33. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






34. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






35. All firms maximize profit by producing where MR = MC






36. Ed = (%dQd)/(%dP). Ignore negative sign






37. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






38. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






39. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






40. Demand for a resource like labor is derived from the demand for the goods produced by the resource






41. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






42. The marginal utility from consumption of more and more of that item falls over time






43. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






44. ATC = TC/Q = AFC + AVC






45. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






46. Entry of new firms shifts the cost curves for all firms downward






47. The mechanism for combining production resources - with existing technology - into finished goods and services






48. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






49. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






50. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic